Personal income lags in October tax revenue report

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Personal income lags in October tax revenue report

Thu, 11/11/2021 - 1:03pm -- tim

by Timothy McQuiston, Vermont Business Magazine

Interim Secretary of Administration Kristin Clouser today released Vermont’s revenue results for October 2021. General, Education, and Transportation Fund cumulative revenues were slightly below targets for October 2021, the first month of the second quarter. Revenues remain above targets for the year-to-date.

Notably, the personal income tax, which has been well above targets for months, was off by nearly $4 million in October (-4.5%). The PI is the state’s most important General Fund revenue source. It remains, however, nearly $12 million ahead of targets for the fiscal year (+3.81%).

Consumer-related tax revenues were a mixed bag.

The tourism-related rooms & meals tax was up, while sales and gasoline were down. Motor vehicles sales were up (+4.95%), which, like the PI, is generally seen as a barometer of economic health.

Overall, the state’s General Fund, Transportation Fund, and Education Fund receipts in September were a combined $222.6 million, or 1.8% below monthly consensus expectations.

Cumulative revenues remain 3% above consensus revenue expectations for the first four (4) months of the State’s fiscal year.

General Fund revenues collected for the month totaled $136.4 million, or $4.2 million below the monthly consensus revenue target.

Fiscal year-to-date, however, General Fund revenues were $578.5 million, exceeding their target by $24.4 million or 4.4%. Personal and corporate income taxes took a brief respite in October from the brisk pace set in the first quarter of the fiscal year.

Clouser said in the revenue statement that, while we are still on track to meet or exceed targets for the year, we will be watching to ensure this is not a new trend.

The Transportation Fund was slightly below consensus expectations for the month, bringing in $25.2 million.

Fiscal year-to-date, the T-Fund brought in $100.2 million which is $450 thousand or -0.4% below the consensus cash flow target.

Revenue into the T-Fund continues to be buoyed by receipts associated with motor vehicle purchases, but gas tax revenues and various receipts in the Other Fees category ran below both consensus expectations for the month and year-to-date. Despite the negative tone in a few T-Fund categories, cumulative receipts remain within the range of the consensus.

The Education Fund was $530,000 or 0.9% above the monthly consensus target, having collected $61.1 million for the month.

For the first four months of the fiscal year, the Education Fund received $229.2 million, which is $2.3 million or 1.0% higher than the consensus target.

Sales & Use taxes remained below expectations for the month and the fiscal year, however, Meals & Rooms taxes have more than filled the gap as tourists have returned to Vermont and the hospitality sector continues its recovery.

According to Interim Secretary Clouser, “Overall, October’s revenue results reflect the uneven pace of Vermont’s recovery but at this point, we remain confident that revenues are on track to meet the consensus revenue estimates for the current fiscal year.”

Governor Scott was asked by VBM at his November 2 press briefing whether he thought revenues might suffer because of the end of the pandemic-related supplemental income provided by the federal government. The Pandemic Emergency Unemployment Compensation (PEUC) program expired September 6.

This October revenue report is the first full month without the supplement since the first version of it was initiated in March 2020.

The governor acknowledged that a change in the positive tax revenue situation could change, as could the tight labor market, but that it would take time to understand the full impact on both without the PEUC.

“I think wages have increased,” Scott said. “They've been propped up in some regards over the last year by supplemental income from the federal government. This may not be something that's going to continue over time unless we are able to put people in those roles and fulfill the needs in the workforce. So we'll see. But I think we've seen a rise in income. It's supply and demand at this point.”

In the most recent unemployment report, Labor Commissioner Michael Harrington said that Vermont is down 25,000 workers and nearly that many jobs in the state are unfilled. The PEUC supplement has been blamed by some for keeping potential workers from looking for jobs. So far, those not flocked have not flocked back to work.

National reports, which suggest some 25 million Americans have not returned to work, suggest that many workers are looking for new career opportunities, instead of returning to their old jobs.

Still, the national labor scene appears to be improving, as new unemployment claims have fallen. This has not yet been the case in Vermont, where unemployment claims are up slightly but at a relatively low level. This suggests that many Vermonters are still not prepared to return to work.

VBM reporting from around the state confirms a continued tight labor market for nearly every industry. This was the case before the pandemic and has been exacerbated by it. Childcare has emerged as a driving force for keeping adults at home, either because of COVID protocols at school or because childcare in general is simply not available because of labor constraints or health concerns.

Kristin Clouser has taken over the Administration Agency for Susanne Young, who retired earlier this month.